Dwarkesh Patel: observation

Transcript context

We’ve seen the valuations of a bunch of software companies crash because people are expecting AI to commoditize software. There’s a potentially naive way of thinking about things, which is: look, Nvidia sends a GDS2 file to TSMC. TSMC builds the logic dies, it builds the switches, then it packages them with the HBM that SK Hynix, Micron, and Samsung make. Then it sends it to an ODM in Taiwan where they assemble the racks. Nvidia is fundamentally making software that other people are manufacturing, and if software gets commoditized, does Nvidia get commoditized? In the end, something has to transform electrons to tokens. The transformation of electrons to tokens and making those tokens more valuable over time is hard to completely commoditize. The transformation from electrons to tokens is such an incredible journey. Making that token is like making one molecule more valuable than another molecule, making one token more valuable than another. The amount of artistry, engineering, science, and invention that goes into making that token valuable, obviously we’re watching it happen in real time. The transformation, the manufacturing, all of the science that goes in there is far from deeply understood and the journey is far from over. I doubt that it will happen. We’re going to make it more efficient, of course. The way that you framed the question is my mental model of our company. The input is electrons, the output is tokens. In the middle is Nvidia. Our job is to do as much as necessary and as little as possible to enable that transformation to be done at incredible capabilities. What I mean by “as little as possible,” whatever I don’t need to do, I partner with somebody and make it part of my ecosystem. If you look at Nvidia today, we probably have the largest ecosystem of partners, both in the supply chain upstream and downstream, all of the computer companies, application developers, and model makers. AI is a five-layer cake, if you will. We have ecosystems across the entire five layers. We try to do as little as possible, but the part that we have to do, as it turns out, is insanely hard. I don’t think that gets commoditized. In fact, I also don’t think the enterprise software companies, the tools makers… Most software companies today are tool makers. Some of them are not. Some of them are workflow codification systems. But for a lot of companies, they’re tool makers. For example, Excel is a tool, PowerPoint is a tool, Cadence makes tools, Synopsys makes tools. I actually see the opposite of what people see. I think the number of agents is going to grow exponentially, and the number of tool users is going to grow exponentially. It’s very likely that the number of instances of all these tools is going to skyrocket. It’s very likely that the number of instances of Synopsys Design Compiler is going to skyrocket, along with the number of agents using the floor planners, our layout tools, and our design rule checkers. Today we’re limited by the number of engineers. Tomorrow, those engineers are going to be supported by a bunch of agents. We’re going to be exploring the design space like you’ve never seen before, and we’re going to use the tools that we use today. I think tool use is going to cause the software companies to skyrocket. The reason why it hasn’t happened yet is because the agents aren’t good enough at using their tools yet. Either these companies are going to build the agents themselves, or agents are going to get good enough to be able to use those tools.…

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